The Chancellor has assured MPs that he is listening to their concerns about upcoming changes to business rates – amid fears that higher costs could force small shops and pubs to close their doors.
More than one in four companies will see their rates go up under a planned revaluation, but Philip Hammond has not committed to introducing measures in next month’s Budget that would soften the blow on affected businesses.
Critics say the revaluation unfairly hits high street businesses, while internet giants with out-of-town warehouses continue to benefit from low rates.
It has emerged that many of the areas which will be hardest hit by the increases are in Conservative heartlands.
For example, rates in the Prime Minister’s Maidenhead constituency are expected to increase by 10% on average – and in Mr Hammond’s seat of Runnymede, businesses are bracing themselves for rises of about 13%.
The Government has insisted that 73% of businesses are going to see their rates frozen or reduced following the revaluation – and 600,000 companies will end up paying nothing at all.
The revaluation is the first major overhaul of the system for seven years. It will lead to major changes in the amount of tax many businesses have to pay, as it evaluates their bill based on the amount their property is worth rather than on how much revenue they make.
Analysts say this is likely to disproportionately affect businesses in the South East and London more than those in the North, and some retailers will see their rates increase by 400%.
In a private letter to Tory colleagues, Communities Secretary Sajid Javid and Treasury Chief Secretary David Gauke said there had been “a relentless campaign of distortions and half-truths” about the revaluation, which was initiated when David Cameron was in power.
They insisted the changes were “nothing to be afraid of” as 2017/18 is going to see “the biggest-ever cut in business rates”.
Mr Javid and Mr Gauke wrote: “This year‘s revaluation has been preceded by a series of reports claiming that rates are going to soar, that appeals are being banned and that hundreds of thousands of businesses will be forced to close. Such claims are simply untrue.”
Last week, research by rates and rental specialists CVS suggested surging business rates have forced thousands of pubs to close their doors – and the problem is only going to get worse when the revaluation comes into effect in April.
The equivalent of four pubs a day closed between April 2010 and the end of 2016, and there is now the lowest-ever recorded number of pubs in England and Wales – with 43,321 remaining in business.
Over the weekend, the chief executive of Sainsbury’s called for “fundamental reforms” to the business rates system – describing it as “archaic” and unfairly favouring digital businesses.
Mike Coupe said: “The way it currently stands, there is an advantage for those without bricks and mortar operations, so there’s a strong case for a level playing field in business rates and taxation more generally.
“Businesses like ours with lots of property and employees face a bigger burden than others.”